1005-00001 · Nexford Industrial Holdings · Transaction Documents/Credit Agreement

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PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT

CALDERWOOD & HARKNESS LLP 425 Lexington Avenue New York, New York 10017

INTERNAL MEMORANDUM

I. Executive Summary

The purpose of this memorandum is to analyze the most favored nation ("MFN") provision contained in the Credit Agreement (the "Credit Agreement") governing the $1,400,000,000 senior secured Term Loan B facility (the "Initial Term Loan B") for Nexford Industrial Holdings Inc. (the "Borrower"), with Crescent Harbor Bank, N.A. ("Crescent Harbor") serving as Administrative Agent and Collateral Agent. This memorandum provides a detailed examination of the MFN provision's mechanics, scope, and carve-outs; evaluates the provision against recent market precedents; assesses the strategic implications for the Borrower's future financing flexibility; and identifies any remaining open drafting items warranting attention prior to execution.

The most favored nation clause protects existing Term Loan B lenders by requiring that if any incremental term loans are incurred within the first twelve (12) months following the Closing Date (March 28, 2025) at an "Effective Yield" (as defined in the Credit Agreement) greater than the Effective Yield on the Initial Term Loan B, the applicable margin (i.e., the interest rate spread) on the Initial Term Loan B shall be increased by the amount necessary so that the Effective Yield on the Initial Term Loan B is no more than fifty (50) basis points less than the Effective Yield on such higher-yielding incremental term loan facility. In effect, this mechanism ensures that existing lenders are not materially disadvantaged by the Borrower's issuance of new incremental debt at more favorable economics without a corresponding adjustment to the pricing of the Initial Term Loan B.

The key parameters of the MFN provision are as follows:

• MFN Threshold: 50 basis points.

• Applicable MFN Period (Sunset): 12 months from the Closing Date (i.e., from March 28, 2025 through March 28, 2026).

• Scope of Coverage: The MFN applies exclusively to incremental term loans incurred under the incremental facility provisions of the Credit Agreement. It does not apply to incremental revolving commitments, incremental equivalent debt incurred outside the Credit Agreement, or refinancing indebtedness.

The provision appears in the Incremental Facility section (Section 2.14) of the Credit Agreement, currently reflected in the third draft circulated by Whitfield & Gage LLP ("Whitfield & Gage") on March 17, 2025, on behalf of Crescent Harbor. The MFN provision has been substantially agreed between the parties following negotiations that commenced at the term sheet stage in early February 2025. No further changes to the provision have been proposed since the commitment letter was executed on February 14, 2025, and the operative language has remained consistent across all three drafts of the Credit Agreement.

Recommendation: The current formulation of the MFN provision is within market norms for sponsor-backed Term Loan B transactions, is consistent with the terms agreed in the commitment letter, and is acceptable from the Borrower's perspective. Certain definitional nuances and conforming drafting points remain to be verified against the execution version, but no further substantive revisions or commercial negotiations are recommended with respect to the MFN provision. Detailed recommendations are set forth in Section VII of this memorandum.

II. Background and Transaction Context

A. Transaction Overview

Borrower. Nexford Industrial Holdings Inc. (the "Borrower" or "Nexford") is a Delaware corporation headquartered at 1400 Industrial Parkway, Schaumburg, Illinois 60173. Nexford operates as a diversified industrials and specialty manufacturing platform, with operations spanning precision-engineered components, fluid power systems, and industrial automation solutions. For the twelve-month period ended December 31, 2024, Nexford reported revenue of approximately $2.1 billion and Adjusted EBITDA (as defined in the Credit Agreement, and consistent with the definition applied for purposes of the existing credit facility) of approximately $385,000,000.

Sponsor. Nexford's equity is held by Granite Peak Capital Partners, LP ("Granite Peak"), a middle-market and upper-middle-market private equity sponsor. Granite Peak acquired Nexford in January 2019 and holds 100% of the equity interests in the Borrower through its holding company subsidiary, Granite Peak NIH Holdings, LLC ("Holdings"). Granite Peak has been an active investor in the industrials and manufacturing sectors, and the current transaction represents a dividend recapitalization designed to return capital to Granite Peak while simultaneously refinancing the Borrower's existing first lien credit facilities on improved terms.

Facility. The Credit Agreement provides for a $1,400,000,000 senior secured Term Loan B facility with the following principal economic terms:

• Interest Rate: Term SOFR plus an applicable margin of 400 basis points per annum.

• SOFR Floor: 0.75% per annum.

• Original Issue discount: 50 basis points (99.50 issue price), resulting in net loan proceeds to the Borrower of approximately $1,393,000,000.

• Maturity: March 28, 2032 (seven years from the Closing Date).

• Amortization: 1.00% per annum of the original principal amount, payable quarterly (0.25% per quarter), with the balance due at maturity.

Use of Proceeds. The proceeds of the Initial Term Loan B, together with cash on hand, will be applied as follows:

(i) to refinance in full the existing $879,375,000 first lien term loan and the existing $190,000,000 revolving credit facility (which is currently undrawn and whose commitments will be terminated at closing) held by Atlas Meridian Bank, N.A.;

(ii) to fund an approximately $335,000,000 dividend recapitalization distribution to Granite Peak NIH Holdings, LLC;

(iii) to pay approximately $38,625,000 in transaction fees and expenses (including arrangement fees, legal fees, and other customary closing costs); and

(iv) to retain approximately $147,000,000 in cash on the Borrower's balance sheet for general corporate purposes.

Pro Forma Leverage. On a pro forma basis after giving effect to the transactions, the Borrower's first lien net leverage ratio is approximately 3.38x (calculated as pro forma first lien net debt of approximately $1,300,400,000 divided by LTM Adjusted EBITDA of approximately $385,000,000), which is well within the market range for sponsor-backed leveraged buyout and recapitalization transactions in the current credit environment.

Administrative Agent and Collateral Agent. Crescent Harbor Bank, N.A., 320 Federal Street, Boston, Massachusetts 02110, is serving as Administrative Agent and Collateral Agent under the Credit Agreement. Crescent Harbor is also acting as sole lead arranger and sole bookrunner for the syndication of the Initial Term Loan B.

Counsel. Whitfield & Gage LLP serves as counsel to Crescent Harbor in its capacity as arranger, Administrative Agent, and Collateral Agent. The lead partner on the matter is Margaret Ashby, with Jonathan Ferris serving as the working associate. Calderwood & Harkness LLP serves as counsel to the Borrower and Holdings.

B. Incremental Facility Framework

The Credit Agreement contains a customary incremental facility provision (Section 2.14) that permits the Borrower to incur additional indebtedness under the Credit Agreement in the form of incremental term loans and/or incremental revolving commitments. The incremental facility capacity is structured as follows:

Free-and-Clear Basket. The Borrower may incur incremental term loans and/or incremental revolving commitments in an aggregate principal amount not to exceed the greater of (x) $280,000,000 and (y) 100% of LTM Adjusted EBITDA (currently approximately $385,000,000) (the "Free-and-Clear Basket"), without the need to satisfy any financial ratio test. The Free-and-Clear Basket is a fixed-dollar basket with a grower component, resetting based on the Borrower's trailing twelve-month Adjusted EBITDA at the time of incurrence.

Ratio-Based Incremental Capacity. In addition to the Free-and-Clear Basket, the Borrower may incur unlimited additional incremental term loans and/or incremental revolving commitments, subject to pro forma compliance (on a total leverage basis, with netting of cash proceeds) with a first lien net leverage ratio not to exceed 4.50x. Given the Borrower's pro forma first lien net leverage at closing of approximately 3.38x, there is meaningful headroom under the ratio-based incremental capacity.

Incremental Equivalent Debt. Separately from the incremental facility provisions of the Credit Agreement, the Borrower may incur "incremental equivalent debt" — that is, indebtedness incurred outside the Credit Agreement structure (such as pari passu secured notes, pari passu secured term loans under a separate credit agreement, or similar instruments) — subject to the same capacity limitations as incremental term loans and incremental revolving commitments. Incremental equivalent debt is secured on a pari passu basis with the obligations under the Credit Agreement and is subject to customary intercreditor arrangements, but it is not incurred under the Credit Agreement and does not carry the same lender protections (including MFN protection) as incremental term loans.

The Role of the MFN Provision. Within this incremental facility framework, the most favored nation provision functions as the primary pricing protection mechanism for existing Term Loan B lenders. It is designed to prevent the Borrower from incurring incremental term loans at significantly higher yields — thereby potentially signaling credit deterioration or simply exploiting market dislocations — without providing a corresponding economic benefit to the initial lenders who assumed credit risk at the original pricing. As discussed in detail below, the MFN provision operates as a "yield floor" for initial lenders, ensuring that they are not left at a material economic disadvantage relative to new incremental lenders who may receive higher pricing for substantially identical credit exposure.

III. Detailed Analysis of the Most Favored Nation Provision

A. Core Mechanics

The MFN provision, as reflected in Section 2.14(b)(iv) of the third draft Credit Agreement, operates as follows:

Trigger. If, at any time during the Applicable MFN Period (as defined below), the Borrower incurs any incremental term loan under the incremental facility provisions of the Credit Agreement at an Effective Yield (as defined below) that is greater than the Effective Yield applicable to the Initial Term Loan B as of the Closing Date, then the applicable margin on the Initial Term Loan B shall be automatically increased by an amount necessary so that the Effective Yield on the Initial Term Loan B is no more than 50 basis points less than the Effective Yield on such incremental term loan.

Threshold. The MFN adjustment is triggered only if the Effective Yield differential between the incremental term loan and the Initial Term Loan B exceeds 50 basis points. If the incremental term loan is priced at an Effective Yield that is less than or equal to 50 basis points above the Effective Yield on the Initial Term Loan B, no adjustment is required. This 50 basis point "cushion" provides the Borrower with meaningful pricing flexibility when incurring incremental debt — it can absorb modest yield increases (reflecting, for example, a slight deterioration in market conditions or a premium demanded by incremental lenders for a smaller tranche size) without triggering a repricing of the entire Initial Term Loan B facility.

Adjustment Calculation. If the threshold is exceeded, the applicable margin on the Initial Term Loan B is increased by the amount of the Effective Yield differential minus 50 basis points. This ensures that the gap between the Initial Term Loan B Effective Yield and the incremental term loan Effective Yield is reduced to exactly 50 basis points.

Illustrative Examples. The following examples illustrate the operation of the MFN provision:

Example 1 — Adjustment Triggered. The Initial Term Loan B carries an Effective Yield of SOFR + 400 basis points (before accounting for OID and floor effects, which are held constant for purposes of this illustration). The Borrower incurs an incremental term loan on September 15, 2025 (within the Applicable MFN Period) at an Effective Yield of SOFR + 475 basis points — a differential of 75 basis points. Because 75 basis points exceeds the 50 basis point threshold, the applicable margin on the Initial Term Loan B is increased by 25 basis points (75 bps differential minus 50 bps threshold), to SOFR + 425 basis points. Following the adjustment, the Effective Yield differential between the two facilities is exactly 50 basis points.

Example 2 — No Adjustment Required. Using the same Initial Term Loan B Effective Yield of SOFR + 400 basis points, the Borrower incurs an incremental term loan on July 1, 2025 at an Effective Yield of SOFR + 440 basis points — a differential of 40 basis points. Because 40 basis points does not exceed the 50 basis point threshold, no adjustment to the Initial Term Loan B spread is required.

Example 3 — Post-Sunset Incurrence. The Borrower incurs an incremental term loan on June 15, 2026 (after the expiration of the Applicable MFN Period on March 28, 2026) at an Effective Yield of SOFR + 525 basis points — a differential of 125 basis points. Because the incremental term loan is incurred after the Applicable MFN Period has expired, no adjustment is required regardless of the magnitude of the yield differential.

B. Definition of "Effective Yield"

The definition of "Effective Yield" is central to the operation of the MFN provision, as it determines the basis on which the pricing comparison between the Initial Term Loan B and any incremental term loan is made. The current draft Credit Agreement defines "Effective Yield" to include the following components:

(i) Applicable Margin. The stated interest rate margin (i.e., the contractual spread over Term SOFR) applicable to the relevant tranche of term loans. For the Initial Term Loan B, this is currently 400 basis points.

(ii) SOFR Floor Benefit. The value attributable to any SOFR floor applicable to the relevant tranche. The Initial Term Loan B carries a SOFR floor of 0.75% per annum. To the extent that the prevailing Term SOFR rate is below 0.75%, the floor effectively increases the all-in yield to the lender (and cost to the Borrower) above the stated margin. If an incremental term loan carries a different SOFR floor (e.g., 1.00%), the floor differential must be taken into account in the Effective Yield comparison. The Credit Agreement specifies that if the SOFR floor on the incremental term loan exceeds the SOFR floor on the Initial Term Loan B, the SOFR floor on the Initial Term Loan B shall be increased to match the incremental term loan SOFR floor, which is then reflected in the Effective Yield calculation. This floor "ratchet" mechanism is standard in the leveraged loan market and ensures that floor differentials are properly captured in the MFN analysis.

(iii) Original Issue discount and Upfront Fees. Any original issue discount ("OID") or upfront fees paid in connection with the relevant tranche, amortized over the lesser of (x) the expected weighted average life of the applicable loans (calculated based on the scheduled amortization and assumed maturity of the loans) and (y) four (4) years. For the Initial Term Loan B, the OID is 50 basis points (99.50 issue price). The four-year amortization cap prevents the dilution of OID economics over an artificially long time horizon and is consistent with current market convention.

The definition of "Effective Yield" expressly excludes the following items:

(i) Arrangement Fees. Any arrangement, structuring, or commitment fees payable to the arrangers or agents in connection with the syndication or arrangement of the incremental term loan. These fees are typically negotiated on a bilateral basis between the Borrower and the arrangers and are not shared with all lenders in the syndicate. Including them in the Effective Yield calculation would artificially inflate the yield comparison and could penalize the Borrower for compensating arrangers for their distribution and underwriting efforts.

(ii) Underwriting and Structuring Fees. Similarly, any underwriting fees, structuring fees, or similar compensation paid to agents or arrangers that are not broadly distributed to the lender group are excluded from the Effective Yield calculation.

(iii) Ticking Fees and Commitment Fees. Any ticking fees, commitment fees, or similar periodic fees payable to lenders during the commitment period prior to funding are excluded, as they compensate lenders for holding capacity during the pre-closing period and do not reflect the ongoing cost of funded debt.

Treatment of the SOFR Credit Spread Adjustment. Under current market convention, the Term SOFR rate may include a credit spread adjustment (CSA) — historically 10 basis points for one-month Term SOFR and approximately 15 basis points for three-month Term SOFR — that was implemented during the transition from LIBOR to SOFR to account for the structural difference between the two benchmark rates. The Credit Agreement provides that the CSA (if applicable) is to be treated consistently across both the Initial Term Loan B and any incremental term loan for purposes of the Effective Yield comparison, so as not to create an artificial yield differential based solely on the choice of interest period. This treatment is standard and unremarkable.

Current Initial Term Loan B Effective Yield. The Effective Yield on the Initial Term Loan B, as of the Closing Date, comprises the following components: (a) SOFR + 400 basis points applicable margin; (b) the benefit of the 0.75% SOFR floor (to the extent prevailing Term SOFR is below 0.75%); and (c) the 50 basis points of OID, amortized over the lesser of the expected weighted average life of the Initial Term Loan B and four years. For purposes of the MFN comparison, this composite yield serves as the baseline against which the Effective Yield of any incremental term loan incurred during the Applicable MFN Period will be measured.

C. Applicable MFN Period (12-Month Sunset)

The MFN protection is subject to a temporal limitation. The provision applies only to incremental term loans incurred during the "Applicable MFN Period," which is defined as the twelve (12) month period commencing on the Closing Date and ending on the first anniversary thereof. In practical terms, the MFN protection is operative from March 28, 2025 through and including March 28, 2026.

After March 28, 2026, the Borrower may incur incremental term loans at any Effective Yield — whether higher, lower, or equal to the Effective Yield on the Initial Term Loan B — without triggering any adjustment to the applicable margin on the Initial Term Loan B. The sunset is absolute and unconditional; it is not subject to extension, reinstatement, or waiver by the Administrative Agent or any lender.

The rationale for the 12-month sunset is well understood in the leveraged loan market. The MFN provision is principally designed to protect initial lenders during the period immediately following the closing, when the lenders' investment thesis and pricing expectations are most closely tied to the original transaction economics. After twelve months, market conditions — including the prevailing credit spread environment, the Borrower's credit profile, and the secondary market trading level of the Initial Term Loan B — may have evolved sufficiently that the original pricing no longer serves as a meaningful benchmark for new issuances. At that point, the secondary market provides an organic mechanism for price discovery, and the MFN's protective function diminishes. The 12-month sunset balances the interests of initial lenders (who receive protection during the critical first year) and the Borrower (who retains flexibility to access the incremental facility without pricing constraints after the sunset expires).

D. Scope and Carve-Outs

The MFN provision is carefully scoped to apply only to certain categories of incremental indebtedness, with several important exclusions.

Applies to: The MFN provision applies to incremental term loans incurred under Section 2.14 of the Credit Agreement — that is, additional tranches of term loans that are issued under the existing Credit Agreement, secured by the same collateral, and administered by Crescent Harbor as Administrative Agent. These incremental term loans are structurally identical to the Initial Term Loan B in all material respects (other than pricing and maturity), and the MFN ensures that the pricing differential between the initial and incremental facilities does not exceed the agreed threshold.

Does not apply to:

(i) Incremental Revolving Commitments. The MFN does not apply to incremental revolving credit commitments incurred under the Credit Agreement. This exclusion is standard, as revolving facilities are fundamentally different instruments from term loans — they involve commitment fees, utilization-based pricing, and borrowing base or availability mechanics that make a direct yield comparison with term loans impractical and potentially misleading.

(ii) Incremental Equivalent Debt. The MFN does not apply to incremental equivalent debt incurred outside the Credit Agreement structure, including pari passu secured notes, pari passu secured term loans under a separate credit agreement, or other debt instruments that qualify as "incremental equivalent debt" under the Credit Agreement. This exclusion is discussed further below.

(iii) Refinancing Indebtedness. The MFN does not apply to replacement or refinancing term loans that are incurred to refinance existing incremental term loans (or the Initial Term Loan B itself). This exclusion ensures that lenders cannot use the MFN as a mechanism to extract pricing increases in connection with ordinary-course refinancings or extensions of existing debt.

Significance of the Incremental Equivalent Debt Exclusion. The exclusion of incremental equivalent debt from MFN coverage is a particularly noteworthy feature of the provision and merits separate discussion. During negotiations, Crescent Harbor (through Whitfield & Gage) initially proposed in the term sheet delivered on February 5, 2025 that the MFN apply to both incremental term loans incurred under the Credit Agreement and incremental equivalent debt incurred outside the Credit Agreement. Calderwood & Harkness, on behalf of the Borrower, successfully negotiated the exclusion of incremental equivalent debt from MFN coverage, which was agreed in the commitment letter executed on February 14, 2025.

The practical significance of this exclusion is substantial. It permits the Borrower to incur pari passu secured debt outside the Credit Agreement structure — for example, through a private placement of secured notes or a separately documented term loan facility — at any yield level, without triggering an MFN adjustment to the Initial Term Loan B spread. This provides the Borrower with an important degree of strategic flexibility, particularly in scenarios where market conditions have deteriorated and incremental debt must be priced at a significant premium to the Initial Term Loan B. By structuring such debt as incremental equivalent debt rather than as an incremental term loan under the Credit Agreement, the Borrower can avoid the cost of an MFN-triggered repricing of the entire $1,400,000,000 Initial Term Loan B facility.

As discussed in Section IV.D below, this exclusion is consistent with current market practice for sponsor-backed Term Loan B transactions and is increasingly common in recent precedent transactions.

E. Adjustment Mechanics

The Credit Agreement specifies the following procedural mechanics for the MFN adjustment:

Retroactive Application. If an MFN adjustment is triggered, the increased applicable margin on the Initial Term Loan B takes effect retroactively as of the date of incurrence of the incremental term loan that triggered the adjustment. The adjustment does not await the next scheduled interest payment date; rather, it applies from the date the incremental term loan is funded, and the incremental interest attributable to the margin increase for the period from the incurrence date to the next interest payment date is payable on such next interest payment date. This retroactive application ensures that initial lenders receive the full economic benefit of the MFN protection from the moment the higher-yielding incremental debt enters the capital structure.

Administrative Agent Calculation. Crescent Harbor Bank, N.A., as Administrative Agent, is responsible for calculating the Effective Yield on the incremental term loan, comparing it to the Effective Yield on the Initial Term Loan B, determining whether the 50 basis point threshold has been exceeded, and calculating the amount of any required margin increase. Upon making such determination, the Administrative Agent is required to provide written notice to the Borrower and the Lenders specifying the amount of the margin increase and the effective date thereof. The Administrative Agent's calculation is determinative absent manifest error.

No Lender Consent Required. The MFN adjustment is automatic and self-executing. No consent, approval, or vote of the initial Term Loan B lenders is required to implement the margin increase. The adjustment flows mechanically from the terms of the Credit Agreement upon the Administrative Agent's determination that the trigger conditions have been satisfied.

Permanence of Adjustment. Once triggered, the MFN adjustment is permanent for the remaining life of the Initial Term Loan B. The increased applicable margin does not reset, decrease, or expire, even if the incremental term loan that triggered the adjustment is subsequently repaid, refinanced, or otherwise retired. This permanence feature is standard in the leveraged loan market and reflects the view that the MFN adjustment compensates initial lenders for a structural repricing of their credit risk, which is not undone by the subsequent retirement of the incremental facility.

IV. Comparison to Recent Market Precedents

In evaluating the MFN provision in the Nexford Credit Agreement, we have reviewed a representative sample of recent sponsor-backed Term Loan B transactions closed in the fourth quarter of 2024 and the first quarter of 2025. The following observations reflect the current market landscape for MFN provisions in comparable transactions.

A. MFN Threshold

The 50 basis point MFN threshold in the Nexford Credit Agreement is the prevailing market standard for Term Loan B transactions in the current leveraged finance market. Among the transactions reviewed, the vast majority employed a 50 basis point threshold, with only a small number of transactions using alternative thresholds.

The observed market range for MFN thresholds in recent sponsor-backed transactions is as follows:

• 50 basis points: Most common threshold, representing the market consensus. Employed in approximately 80-85% of the sponsor-backed Term Loan B transactions reviewed.

• 75 basis points: Less common; typically seen in larger-capitalization transactions (facilities in excess of $3.0 billion) or transactions involving particularly strong credits with investment-grade characteristics. The higher threshold provides additional pricing flexibility to the borrower but is generally achievable only by borrowers with significant negotiating leverage or in periods of strong lender demand.

• No MFN protection: Some "covenant-lite" transactions completed in 2024 featured no MFN protection at all, but these were generally in the broadly syndicated loan market for investment-grade crossover credits or transactions where the initial pricing was already highly competitive. These transactions are not directly comparable to the Nexford transaction given the differences in credit profile, leverage, and syndication dynamics.

The 50 basis point threshold in the Nexford Credit Agreement is squarely within the market mainstream and does not present any issues from the Borrower's perspective.

B. Sunset Period

The 12-month Applicable MFN Period in the Nexford Credit Agreement is the most common sunset duration in the current market. The observed range of sunset periods in recent transactions is as follows:

• 6 months: Borrower-favorable; less common in the current market environment. A 6-month sunset provides minimal protection to initial lenders and is typically seen only in transactions where the borrower has exceptional negotiating leverage or where the initial pricing is set at a significant premium to prevailing market levels.

• 12 months: The consensus middle ground and the most frequently observed sunset period. Employed in the majority of recent sponsor-backed Term Loan B transactions. The 12-month sunset balances lender protection with borrower flexibility and is considered the "default" duration in the absence of compelling reasons to deviate.

• 18 months: Lender-favorable; less common but observed in transactions where lenders have greater negotiating leverage (e.g., challenging syndication markets, weaker credit profiles, or smaller facilities with limited lender competition). An 18-month sunset was the initial Crescent Harbor proposal, which Calderwood & Harkness successfully negotiated down to 12 months.

Some recent transactions have featured "tiered" sunset structures — for example, a 50 basis point MFN threshold for the first 6 months, followed by no MFN protection for the remaining period, or a step-up in the threshold from 50 basis points to 75 basis points at the 6-month mark. These structures are not yet common in the sponsor-backed Term Loan B market and were not proposed by either party in the Nexford transaction. The straightforward 12-month sunset in the Nexford Credit Agreement is clean, easily administrable, and consistent with the prevailing market standard.

C. Effective Yield Definition

The definition of "Effective Yield" in the Nexford Credit Agreement is consistent with market practice in the following key respects:

OID/Upfront Fee Amortization. The inclusion of OID and upfront fees in the Effective Yield calculation, amortized over the lesser of the expected weighted average life of the applicable loans and four years, is the standard formulation in the leveraged loan market. The four-year amortization cap is virtually universal and prevents the dilution of OID economics that would result from amortizing the discount over the full contractual term of a seven-year maturity loan.

Exclusion of Arrangement and Structuring Fees. The exclusion of arrangement fees, structuring fees, underwriting fees, and similar agent/arranger compensation from the Effective Yield calculation is also market standard. This exclusion is important from the Borrower's perspective because it prevents private fee arrangements negotiated bilaterally between the Borrower and the arrangers of the incremental facility from inflating the Effective Yield and inadvertently triggering an MFN adjustment. The lender community has generally accepted this exclusion, recognizing that arranger compensation reflects the value of distribution and underwriting services rather than the ongoing credit economics of the facility.

SOFR Floor Treatment. The treatment of SOFR floors in the Effective Yield comparison — specifically, the inclusion of any floor differential in the yield calculation and the "ratchet" mechanism that increases the Initial Term Loan B floor to match a higher incremental facility floor — is consistent with the approach observed in the majority of recent precedent transactions. This treatment ensures that differences in floor levels are fully captured in the MFN analysis and cannot be used to circumvent the intent of the provision.

D. Incremental Equivalent Debt Exclusion

The exclusion of incremental equivalent debt from MFN coverage is an increasingly common feature in sponsor-backed Term Loan B transactions. Based on our review of recent precedents, approximately 60-70% of sponsor-backed Term Loan B credit agreements executed in the fourth quarter of 2024 and the first quarter of 2025 excluded incremental equivalent debt from MFN coverage. This represents a meaningful shift from the market practice observed as recently as 2022-2023, when the exclusion was present in a smaller proportion of transactions (estimated at 40-50%).

The trend toward excluding incremental equivalent debt from MFN coverage reflects the broader evolution of incremental capacity provisions in the leveraged loan market. As incremental equivalent debt structures have become more common and more widely accepted by the institutional lender community, borrowers have increasingly sought (and obtained) the flexibility to access the debt capital markets through non-Credit Agreement structures without the constraints imposed by the MFN. From the Borrower's perspective, this exclusion provides significant strategic optionality, particularly in scenarios where market conditions or acquisition financing requirements necessitate the issuance of higher-yielding secured debt.

The exclusion of incremental equivalent debt from MFN coverage in the Nexford Credit Agreement is consistent with current market practice and was successfully negotiated by Calderwood & Harkness at the term sheet stage. It is a borrower-favorable feature that should be preserved in the execution version of the Credit Agreement.

V. Borrower Considerations and Strategic Implications

A. Impact on Future Financing Flexibility

The MFN provision, as currently drafted, provides Nexford with reasonable flexibility to incur incremental term loans during the first twelve months following closing at modestly higher pricing without triggering an adjustment to the Initial Term Loan B spread. The 50 basis point threshold creates a meaningful buffer that can absorb the kind of modest pricing increases that typically result from normal market fluctuations, seasonal supply/demand dynamics, or the inherent premium associated with smaller incremental tranches.

Critically, the incremental equivalent debt exclusion provides Nexford with an important "escape valve." If Nexford needs to raise incremental secured debt within the first 12 months at a materially higher yield — for example, in connection with a significant acquisition or in a deteriorating credit market environment where incremental term loan pricing has moved significantly wider — it can structure the debt as incremental equivalent debt (i.e., secured notes or a separately documented term loan facility) rather than as an incremental term loan under the Credit Agreement. By doing so, Nexford can avoid triggering the MFN adjustment and the attendant repricing of the entire $1,400,000,000 Initial Term Loan B facility, which could represent a significant incremental cost.

To illustrate the potential cost implications: if an MFN adjustment of 25 basis points were triggered on the full $1,400,000,000 Initial Term Loan B facility, the incremental annual interest cost to the Borrower would be approximately $3,500,000 per year. Over the remaining six-year weighted average life of the facility, the present value of this incremental cost could be substantial. The incremental equivalent debt exclusion enables Nexford to avoid this outcome while still accessing the secured debt markets.

From a capacity perspective, the Borrower's pro forma first lien net leverage at closing is approximately 3.38x, which is well below the 4.50x incurrence test applicable to ratio-based incremental capacity. This implies that Nexford will have substantial incremental capacity — both under the Free-and-Clear Basket and under the ratio-based test — to raise additional debt for acquisitions, capital expenditures, or other corporate purposes. The MFN provision does not restrict the amount of incremental debt that may be incurred; it affects only the pricing consequences of certain types of incremental issuances during the first twelve months.

B. Interaction with Soft Call Premium

The Credit Agreement includes a "soft call" premium of 101 (1.00%) applicable to repricing transactions occurring within the first six (6) months after the Closing Date (i.e., through and including September 28, 2025). A "repricing transaction" is generally defined as (a) a refinancing or replacement of the Initial Term Loan B with a new term loan facility at a lower effective interest rate or (b) an amendment to the Credit Agreement that reduces the applicable margin on the Initial Term Loan B.

The MFN provision and the soft call premium serve complementary but distinct protective functions for initial lenders:

• The soft call premium protects initial lenders against early refinancing or repricing at tighter spreads — i.e., it compensates lenders if the Borrower takes advantage of improved market conditions to reduce its borrowing costs within the first six months.

• The MFN provision protects initial lenders against yield dilution through incremental facilities — i.e., it ensures that new lenders entering the credit at higher yields do not receive materially better economics than the initial lenders who assumed the original credit risk.

The Borrower should be aware that, in certain scenarios, both provisions could be implicated simultaneously. If the Borrower were to incur an incremental term loan within the first six months at a higher yield and, in conjunction with or shortly after such incurrence, pursue a repricing of the Initial Term Loan B, the soft call premium could be triggered in addition to the MFN adjustment. However, the MFN adjustment itself — which is an automatic increase in the applicable margin — should not constitute a "repricing transaction" for purposes of the soft call provision, as it results in an increase rather than a decrease in the effective interest rate. This interpretation is consistent with the plain language of the Credit Agreement and with market practice, but should be confirmed in the execution version.

C. Interaction with the Free-and-Clear Basket

The Free-and-Clear Basket (the greater of $280,000,000 and 100% of LTM Adjusted EBITDA, currently approximately $385,000,000) permits the Borrower to incur incremental term loans and/or incremental revolving commitments without satisfying any financial ratio test. However, the Free-and-Clear Basket does not exempt incremental term loans from MFN coverage. This distinction is important: the Free-and-Clear Basket is a capacity limitation (how much incremental debt can be incurred), whereas the MFN is a pricing protection mechanism (at what yield incremental debt can be incurred without triggering a repricing of the existing facility).

Even if an incremental term loan is incurred entirely within the Free-and-Clear Basket and without any requirement to satisfy the 4.50x first lien net leverage incurrence test, it remains subject to the MFN provision if incurred within the 12-month Applicable MFN Period and if its Effective Yield exceeds the Initial Term Loan B Effective Yield by more than 50 basis points. This treatment is standard market practice and was not contested during negotiations. The Borrower and Granite Peak should factor this pricing constraint into their planning for any incremental term loan issuances during the first year.

VI. Negotiation History

The MFN provision was negotiated during the term sheet and commitment letter phase of the transaction. The following is a summary of the key negotiation milestones:

February 5, 2025 — Crescent Harbor Term Sheet. The initial term sheet delivered by Crescent Harbor (through Whitfield & Gage) proposed MFN protection with the following parameters: (a) a 50 basis point threshold; (b) an 18-month sunset period; and (c) coverage of both incremental term loans incurred under the Credit Agreement and incremental equivalent debt incurred outside the Credit Agreement. The 50 basis point threshold was consistent with market expectations and was not contested.

February 10, 2025 — Calderwood & Harkness Markup. Calderwood & Harkness, on behalf of the Borrower, delivered a marked term sheet proposing the following modifications to the MFN provision: (i) reducing the sunset period from 18 months to 12 months, consistent with the prevailing market standard for comparable sponsor-backed transactions; (ii) excluding incremental equivalent debt from MFN coverage, to preserve the Borrower's flexibility to access the secured debt markets through non-Credit Agreement structures without triggering a repricing of the Initial Term Loan B; and (iii) confirming that the Effective Yield definition excludes arrangement fees, structuring fees, and similar arranger compensation that is not broadly shared with the lender syndicate.

February 14, 2025 — Commitment Letter Execution. Following a brief negotiation, Whitfield & Gage (on behalf of Crescent Harbor) agreed to both the 12-month sunset and the exclusion of incremental equivalent debt from MFN coverage. These terms were incorporated into the commitment letter executed on February 14, 2025. The Effective Yield exclusion of arrangement and structuring fees was not specifically addressed in the commitment letter (which cross-referenced the forthcoming credit agreement for detailed definitions) but was understood to be market standard and non-controversial.

February 24, 2025 — First Draft Credit Agreement. The first draft of the Credit Agreement, prepared by Whitfield & Gage, incorporated the MFN terms agreed in the commitment letter. The definition of "Effective Yield" in the first draft expressly excluded arrangement fees and structuring fees, consistent with Calderwood & Harkness's term sheet markup. Calderwood & Harkness reviewed the first draft and confirmed that the MFN provision was consistent with the agreed terms. No comments were raised on the MFN provision in Calderwood & Harkness's markup of the first draft, which was returned on March 3, 2025.

March 10, 2025 — Second Draft Credit Agreement. The second draft, circulated by Whitfield & Gage, made minor conforming changes to the incremental facility provisions but did not modify the MFN provision. No comments were raised on the MFN provision by either party.

March 17, 2025 — Third Draft Credit Agreement. The third draft, which is the current working draft, reflects no changes to the MFN provision from the second draft. The provision is substantially agreed as of the third draft and is not expected to be the subject of further negotiation.

In summary, the MFN provision was efficiently negotiated, with Calderwood & Harkness securing the two principal concessions sought by the Borrower (reduction of the sunset from 18 months to 12 months and exclusion of incremental equivalent debt) at the commitment letter stage. No further substantive modifications have been required or proposed.

VII. Open Items and Recommendations

A. Remaining Drafting Points

While the MFN provision is substantially agreed, the following drafting points should be verified in the execution version of the Credit Agreement to ensure conformity with the agreed commercial terms:

1. OID Amortization Period. Confirm that the definition of "Effective Yield" in the execution version clearly specifies that OID and upfront fees are to be amortized over the lesser of (x) the expected weighted average life of the applicable loans and (y) four (4) years. The current draft language in the third draft Credit Agreement is consistent with this formulation, but the definition should be checked for conformity with the specific language used in the term sheet and commitment letter to avoid any ambiguity. In particular, verify that the phrase "expected weighted average life" is used consistently and is not inadvertently replaced with "remaining weighted average life" or "stated maturity," which would produce different results.

2. Mechanism of Adjustment (Spread vs. Effective Yield Equalization). Confirm that the MFN adjustment is expressed in terms of an increase in the applicable margin (spread) sufficient to ensure that the Effective Yield on the Initial Term Loan B is no more than 50 basis points less than the Effective Yield on the incremental term loan. The current draft uses this "Effective Yield equalization" formulation, which is the preferred approach because it captures all components of yield (margin, floor, and OID) in a single comparison, rather than adjusting each component individually. The alternative formulation — which would adjust only the applicable margin component by the spread differential, without accounting for floor or OID differences — could produce unintended results and should be avoided. The current draft language is appropriate, but this point should be confirmed in the final review.

3. Scope of Exclusions. Verify that the definitions of "Incremental Term Loans," "Incremental Equivalent Debt," and "Refinancing Indebtedness" in the Credit Agreement clearly and unambiguously delineate the scope of MFN coverage. In particular, confirm that: (a) incremental equivalent debt incurred under Section 2.15 (or the analogous provision) is expressly excluded from the definition of "Incremental Term Loans" for purposes of Section 2.14(b)(iv) (the MFN provision); and (b) refinancing indebtedness incurred to replace or refinance existing incremental term loans is similarly excluded. Cross-references between the relevant definitions should be checked for accuracy.

These drafting points are conforming and cleanup items that do not require further commercial negotiation between the parties. They can be addressed as part of the standard closing review process.

B. Recommendation

Based on the analysis set forth in this memorandum, we make the following recommendations:

1. No Further Revisions Recommended. The most favored nation provision as currently drafted in the third draft Credit Agreement is within market norms for sponsor-backed Term Loan B facilities, is consistent with the terms agreed in the commitment letter executed on February 14, 2025, and is acceptable from the Borrower's perspective. No further substantive revisions to the MFN provision are recommended.

2. Verification of Drafting Points. The remaining drafting points identified in Section VII.A above should be verified in the execution version of the Credit Agreement as part of the standard closing review process. These are conforming items that do not require further commercial negotiation.

3. Client Communication. We recommend advising Nexford's internal legal and finance teams — specifically, David Engstrom, General Counsel; Michelle Kaplan, Chief Financial Officer; and Priya Mehta, Vice President of Treasury — as well as Granite Peak's deal team (Ryan Ostrowski, Principal) that the MFN provision has been resolved on terms consistent with current market standards and the agreed term sheet, and that no further commercial negotiation is required with respect to this provision. This communication will allow the client teams to focus their attention on the remaining open items in the Credit Agreement (which are addressed in separate memoranda) and will facilitate an efficient path to closing.

VIII. Conclusion

The most favored nation provision in the Nexford Industrial Holdings Inc. $1,400,000,000 Senior Secured Term Loan B Credit Agreement, as reflected in the third draft Credit Agreement circulated on March 17, 2025, is a well-crafted and market-standard provision that appropriately balances the interests of the Borrower and the initial Term Loan B lenders. The key features of the provision — the 50 basis point MFN threshold, the 12-month sunset period expiring on March 28, 2026, and the exclusion of incremental equivalent debt from MFN coverage — are each within the mainstream of current market practice for comparable sponsor-backed leveraged finance transactions.

The provision was efficiently negotiated, with Calderwood & Harkness securing the two principal concessions sought by the Borrower (reduction of the sunset from 18 months to 12 months and exclusion of incremental equivalent debt) at the commitment letter stage. The provision has remained unchanged through three drafts of the Credit Agreement and is substantially agreed between the parties.

The MFN provision is protective of the Borrower's future financing flexibility while providing reasonable and proportionate protection to initial Term Loan B lenders against yield dilution through incremental issuances during the first year following closing. The remaining drafting points identified in this memorandum are conforming items that should be addressed in the execution version but do not require further commercial negotiation.

This memorandum should be read in conjunction with the Internal Memorandum — Incremental Facility Provisions and Capacity Analysis (to be dated March 13, 2025) for a comprehensive view of the Borrower's incremental debt capacity, incurrence tests, and related provisions under the Credit Agreement. Taken together, these two memoranda provide a complete picture of the incremental facility framework governing the Nexford Credit Agreement.

DISTRIBUTION: This memorandum is limited in distribution to the Calderwood & Harkness LLP deal team for Matter No. 1005-00001 (Client/Matter Code: IBL-NIH-2025-031). This memorandum constitutes attorney work product and is protected by the attorney-client privilege and the work product doctrine. It is intended solely for internal use by Calderwood & Harkness LLP in connection with its representation of Nexford Industrial Holdings Inc. and Granite Peak NIH Holdings, LLC. No portion of this memorandum may be disclosed to any third party without the prior written consent of the undersigned.

PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT

Date:	March 11, 2025
To:	Claudia Merritt, Responsible Partner, Banking & Finance
From:	Marcus Leung, Lead Associate, Banking & Finance
Re:	Most Favored Nation (MFN) Provision Analysis — Nexford Industrial Holdings Inc. $1,400,000,000 Senior Secured Term Loan B
Matter No.:	1005-00001
Client/Matter Code:	IBL-NIH-2025-031

PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP 425 Lexington Avenue New York, New York 10017
INTERNAL MEMORANDUM
I. Executive Summary
The purpose of this memorandum is to analyze the most favored nation ("MFN") provision contained in the Credit Agreement (the "Credit Agreement") governing the $1,400,000,000 senior secured Term Loan B facility (the "Initial Term Loan B") for Nexford Industrial Holdings Inc. (the "Borrower"), with Crescent Harbor Bank, N.A. ("Crescent Harbor") serving as Administrative Agent and Collateral Agent. This memorandum provides a detailed examination of the MFN provision's mechanics, scope, and carve-outs; evaluates the provision against recent market precedents; assesses the strategic implications for the Borrower's future financing flexibility; and identifies any remaining open drafting items warranting attention prior to execution.
The most favored nation clause protects existing Term Loan B lenders by requiring that if any incremental term loans are incurred within the first twelve (12) months following the Closing Date (March 28, 2025) at an "Effective Yield" (as defined in the Credit Agreement) greater than the Effective Yield on the Initial Term Loan B, the applicable margin (i.e., the interest rate spread) on the Initial Term Loan B shall be increased by the amount necessary so that the Effective Yield on the Initial Term Loan B is no more than fifty (50) basis points less than the Effective Yield on such higher-yielding incremental term loan facility. In effect, this mechanism ensures that existing lenders are not materially disadvantaged by the Borrower's issuance of new incremental debt at more favorable economics without a corresponding adjustment to the pricing of the Initial Term Loan B.
The key parameters of the MFN provision are as follows:
•  MFN Threshold: 50 basis points.
•  Applicable MFN Period (Sunset): 12 months from the Closing Date (i.e., from March 28, 2025 through March 28, 2026).
•  Scope of Coverage: The MFN applies exclusively to incremental term loans incurred under the incremental facility provisions of the Credit Agreement. It does not apply to incremental revolving commitments, incremental equivalent debt incurred outside the Credit Agreement, or refinancing indebtedness.
The provision appears in the Incremental Facility section (Section 2.14) of the Credit Agreement, currently reflected in the third draft circulated by Whitfield & Gage LLP ("Whitfield & Gage") on March 17, 2025, on behalf of Crescent Harbor. The MFN provision has been substantially agreed between the parties following negotiations that commenced at the term sheet stage in early February 2025. No further changes to the provision have been proposed since the commitment letter was executed on February 14, 2025, and the operative language has remained consistent across all three drafts of the Credit Agreement.
Recommendation: The current formulation of the MFN provision is within market norms for sponsor-backed Term Loan B transactions, is consistent with the terms agreed in the commitment letter, and is acceptable from the Borrower's perspective. Certain definitional nuances and conforming drafting points remain to be verified against the execution version, but no further substantive revisions or commercial negotiations are recommended with respect to the MFN provision. Detailed recommendations are set forth in Section VII of this memorandum.
II. Background and Transaction Context
A. Transaction Overview
Borrower. Nexford Industrial Holdings Inc. (the "Borrower" or "Nexford") is a Delaware corporation headquartered at 1400 Industrial Parkway, Schaumburg, Illinois 60173. Nexford operates as a diversified industrials and specialty manufacturing platform, with operations spanning precision-engineered components, fluid power systems, and industrial automation solutions. For the twelve-month period ended December 31, 2024, Nexford reported revenue of approximately $2.1 billion and Adjusted EBITDA (as defined in the Credit Agreement, and consistent with the definition applied for purposes of the existing credit facility) of approximately $385,000,000.
Sponsor. Nexford's equity is held by Granite Peak Capital Partners, LP ("Granite Peak"), a middle-market and upper-middle-market private equity sponsor. Granite Peak acquired Nexford in January 2019 and holds 100% of the equity interests in the Borrower through its holding company subsidiary, Granite Peak NIH Holdings, LLC ("Holdings"). Granite Peak has been an active investor in the industrials and manufacturing sectors, and the current transaction represents a dividend recapitalization designed to return capital to Granite Peak while simultaneously refinancing the Borrower's existing first lien credit facilities on improved terms.
Facility. The Credit Agreement provides for a $1,400,000,000 senior secured Term Loan B facility with the following principal economic terms:
•  Interest Rate: Term SOFR plus an applicable margin of 400 basis points per annum.
•  SOFR Floor: 0.75% per annum.
•  Original Issue discount: 50 basis points (99.50 issue price), resulting in net loan proceeds to the Borrower of approximately $1,393,000,000.
•  Maturity: March 28, 2032 (seven years from the Closing Date).
•  Amortization: 1.00% per annum of the original principal amount, payable quarterly (0.25% per quarter), with the balance due at maturity.
Use of Proceeds. The proceeds of the Initial Term Loan B, together with cash on hand, will be applied as follows:
(i) to refinance in full the existing $879,375,000 first lien term loan and the existing $190,000,000 revolving credit facility (which is currently undrawn and whose commitments will be terminated at closing) held by Atlas Meridian Bank, N.A.;
(ii) to fund an approximately $335,000,000 dividend recapitalization distribution to Granite Peak NIH Holdings, LLC;
(iii) to pay approximately $38,625,000 in transaction fees and expenses (including arrangement fees, legal fees, and other customary closing costs); and
(iv) to retain approximately $147,000,000 in cash on the Borrower's balance sheet for general corporate purposes.
Pro Forma Leverage. On a pro forma basis after giving effect to the transactions, the Borrower's first lien net leverage ratio is approximately 3.38x (calculated as pro forma first lien net debt of approximately $1,300,400,000 divided by LTM Adjusted EBITDA of approximately $385,000,000), which is well within the market range for sponsor-backed leveraged buyout and recapitalization transactions in the current credit environment.
Administrative Agent and Collateral Agent. Crescent Harbor Bank, N.A., 320 Federal Street, Boston, Massachusetts 02110, is serving as Administrative Agent and Collateral Agent under the Credit Agreement. Crescent Harbor is also acting as sole lead arranger and sole bookrunner for the syndication of the Initial Term Loan B.
Counsel. Whitfield & Gage LLP serves as counsel to Crescent Harbor in its capacity as arranger, Administrative Agent, and Collateral Agent. The lead partner on the matter is Margaret Ashby, with Jonathan Ferris serving as the working associate. Calderwood & Harkness LLP serves as counsel to the Borrower and Holdings.
B. Incremental Facility Framework
The Credit Agreement contains a customary incremental facility provision (Section 2.14) that permits the Borrower to incur additional indebtedness under the Credit Agreement in the form of incremental term loans and/or incremental revolving commitments. The incremental facility capacity is structured as follows:
Free-and-Clear Basket. The Borrower may incur incremental term loans and/or incremental revolving commitments in an aggregate principal amount not to exceed the greater of (x) $280,000,000 and (y) 100% of LTM Adjusted EBITDA (currently approximately $385,000,000) (the "Free-and-Clear Basket"), without the need to satisfy any financial ratio test. The Free-and-Clear Basket is a fixed-dollar basket with a grower component, resetting based on the Borrower's trailing twelve-month Adjusted EBITDA at the time of incurrence.
Ratio-Based Incremental Capacity. In addition to the Free-and-Clear Basket, the Borrower may incur unlimited additional incremental term loans and/or incremental revolving commitments, subject to pro forma compliance (on a total leverage basis, with netting of cash proceeds) with a first lien net leverage ratio not to exceed 4.50x. Given the Borrower's pro forma first lien net leverage at closing of approximately 3.38x, there is meaningful headroom under the ratio-based incremental capacity.
Incremental Equivalent Debt. Separately from the incremental facility provisions of the Credit Agreement, the Borrower may incur "incremental equivalent debt" — that is, indebtedness incurred outside the Credit Agreement structure (such as pari passu secured notes, pari passu secured term loans under a separate credit agreement, or similar instruments) — subject to the same capacity limitations as incremental term loans and incremental revolving commitments. Incremental equivalent debt is secured on a pari passu basis with the obligations under the Credit Agreement and is subject to customary intercreditor arrangements, but it is not incurred under the Credit Agreement and does not carry the same lender protections (including MFN protection) as incremental term loans.
The Role of the MFN Provision. Within this incremental facility framework, the most favored nation provision functions as the primary pricing protection mechanism for existing Term Loan B lenders. It is designed to prevent the Borrower from incurring incremental term loans at significantly higher yields — thereby potentially signaling credit deterioration or simply exploiting market dislocations — without providing a corresponding economic benefit to the initial lenders who assumed credit risk at the original pricing. As discussed in detail below, the MFN provision operates as a "yield floor" for initial lenders, ensuring that they are not left at a material economic disadvantage relative to new incremental lenders who may receive higher pricing for substantially identical credit exposure.
III. Detailed Analysis of the Most Favored Nation Provision
A. Core Mechanics
The MFN provision, as reflected in Section 2.14(b)(iv) of the third draft Credit Agreement, operates as follows:
Trigger. If, at any time during the Applicable MFN Period (as defined below), the Borrower incurs any incremental term loan under the incremental facility provisions of the Credit Agreement at an Effective Yield (as defined below) that is greater than the Effective Yield applicable to the Initial Term Loan B as of the Closing Date, then the applicable margin on the Initial Term Loan B shall be automatically increased by an amount necessary so that the Effective Yield on the Initial Term Loan B is no more than 50 basis points less than the Effective Yield on such incremental term loan.
Threshold. The MFN adjustment is triggered only if the Effective Yield differential between the incremental term loan and the Initial Term Loan B exceeds 50 basis points. If the incremental term loan is priced at an Effective Yield that is less than or equal to 50 basis points above the Effective Yield on the Initial Term Loan B, no adjustment is required. This 50 basis point "cushion" provides the Borrower with meaningful pricing flexibility when incurring incremental debt — it can absorb modest yield increases (reflecting, for example, a slight deterioration in market conditions or a premium demanded by incremental lenders for a smaller tranche size) without triggering a repricing of the entire Initial Term Loan B facility.
Adjustment Calculation. If the threshold is exceeded, the applicable margin on the Initial Term Loan B is increased by the amount of the Effective Yield differential minus 50 basis points. This ensures that the gap between the Initial Term Loan B Effective Yield and the incremental term loan Effective Yield is reduced to exactly 50 basis points.
Illustrative Examples. The following examples illustrate the operation of the MFN provision:
Example 1 — Adjustment Triggered. The Initial Term Loan B carries an Effective Yield of SOFR + 400 basis points (before accounting for OID and floor effects, which are held constant for purposes of this illustration). The Borrower incurs an incremental term loan on September 15, 2025 (within the Applicable MFN Period) at an Effective Yield of SOFR + 475 basis points — a differential of 75 basis points. Because 75 basis points exceeds the 50 basis point threshold, the applicable margin on the Initial Term Loan B is increased by 25 basis points (75 bps differential minus 50 bps threshold), to SOFR + 425 basis points. Following the adjustment, the Effective Yield differential between the two facilities is exactly 50 basis points.
Example 2 — No Adjustment Required. Using the same Initial Term Loan B Effective Yield of SOFR + 400 basis points, the Borrower incurs an incremental term loan on July 1, 2025 at an Effective Yield of SOFR + 440 basis points — a differential of 40 basis points. Because 40 basis points does not exceed the 50 basis point threshold, no adjustment to the Initial Term Loan B spread is required.
Example 3 — Post-Sunset Incurrence. The Borrower incurs an incremental term loan on June 15, 2026 (after the expiration of the Applicable MFN Period on March 28, 2026) at an Effective Yield of SOFR + 525 basis points — a differential of 125 basis points. Because the incremental term loan is incurred after the Applicable MFN Period has expired, no adjustment is required regardless of the magnitude of the yield differential.
B. Definition of "Effective Yield"
The definition of "Effective Yield" is central to the operation of the MFN provision, as it determines the basis on which the pricing comparison between the Initial Term Loan B and any incremental term loan is made. The current draft Credit Agreement defines "Effective Yield" to include the following components:
(i) Applicable Margin. The stated interest rate margin (i.e., the contractual spread over Term SOFR) applicable to the relevant tranche of term loans. For the Initial Term Loan B, this is currently 400 basis points.
(ii) SOFR Floor Benefit. The value attributable to any SOFR floor applicable to the relevant tranche. The Initial Term Loan B carries a SOFR floor of 0.75% per annum. To the extent that the prevailing Term SOFR rate is below 0.75%, the floor effectively increases the all-in yield to the lender (and cost to the Borrower) above the stated margin. If an incremental term loan carries a different SOFR floor (e.g., 1.00%), the floor differential must be taken into account in the Effective Yield comparison. The Credit Agreement specifies that if the SOFR floor on the incremental term loan exceeds the SOFR floor on the Initial Term Loan B, the SOFR floor on the Initial Term Loan B shall be increased to match the incremental term loan SOFR floor, which is then reflected in the Effective Yield calculation. This floor "ratchet" mechanism is standard in the leveraged loan market and ensures that floor differentials are properly captured in the MFN analysis.
(iii) Original Issue discount and Upfront Fees. Any original issue discount ("OID") or upfront fees paid in connection with the relevant tranche, amortized over the lesser of (x) the expected weighted average life of the applicable loans (calculated based on the scheduled amortization and assumed maturity of the loans) and (y) four (4) years. For the Initial Term Loan B, the OID is 50 basis points (99.50 issue price). The four-year amortization cap prevents the dilution of OID economics over an artificially long time horizon and is consistent with current market convention.
The definition of "Effective Yield" expressly excludes the following items:
(i) Arrangement Fees. Any arrangement, structuring, or commitment fees payable to the arrangers or agents in connection with the syndication or arrangement of the incremental term loan. These fees are typically negotiated on a bilateral basis between the Borrower and the arrangers and are not shared with all lenders in the syndicate. Including them in the Effective Yield calculation would artificially inflate the yield comparison and could penalize the Borrower for compensating arrangers for their distribution and underwriting efforts.
(ii) Underwriting and Structuring Fees. Similarly, any underwriting fees, structuring fees, or similar compensation paid to agents or arrangers that are not broadly distributed to the lender group are excluded from the Effective Yield calculation.
(iii) Ticking Fees and Commitment Fees. Any ticking fees, commitment fees, or similar periodic fees payable to lenders during the commitment period prior to funding are excluded, as they compensate lenders for holding capacity during the pre-closing period and do not reflect the ongoing cost of funded debt.
Treatment of the SOFR Credit Spread Adjustment. Under current market convention, the Term SOFR rate may include a credit spread adjustment (CSA) — historically 10 basis points for one-month Term SOFR and approximately 15 basis points for three-month Term SOFR — that was implemented during the transition from LIBOR to SOFR to account for the structural difference between the two benchmark rates. The Credit Agreement provides that the CSA (if applicable) is to be treated consistently across both the Initial Term Loan B and any incremental term loan for purposes of the Effective Yield comparison, so as not to create an artificial yield differential based solely on the choice of interest period. This treatment is standard and unremarkable.
Current Initial Term Loan B Effective Yield. The Effective Yield on the Initial Term Loan B, as of the Closing Date, comprises the following components: (a) SOFR + 400 basis points applicable margin; (b) the benefit of the 0.75% SOFR floor (to the extent prevailing Term SOFR is below 0.75%); and (c) the 50 basis points of OID, amortized over the lesser of the expected weighted average life of the Initial Term Loan B and four years. For purposes of the MFN comparison, this composite yield serves as the baseline against which the Effective Yield of any incremental term loan incurred during the Applicable MFN Period will be measured.
C. Applicable MFN Period (12-Month Sunset)
The MFN protection is subject to a temporal limitation. The provision applies only to incremental term loans incurred during the "Applicable MFN Period," which is defined as the twelve (12) month period commencing on the Closing Date and ending on the first anniversary thereof. In practical terms, the MFN protection is operative from March 28, 2025 through and including March 28, 2026.
After March 28, 2026, the Borrower may incur incremental term loans at any Effective Yield — whether higher, lower, or equal to the Effective Yield on the Initial Term Loan B — without triggering any adjustment to the applicable margin on the Initial Term Loan B. The sunset is absolute and unconditional; it is not subject to extension, reinstatement, or waiver by the Administrative Agent or any lender.
The rationale for the 12-month sunset is well understood in the leveraged loan market. The MFN provision is principally designed to protect initial lenders during the period immediately following the closing, when the lenders' investment thesis and pricing expectations are most closely tied to the original transaction economics. After twelve months, market conditions — including the prevailing credit spread environment, the Borrower's credit profile, and the secondary market trading level of the Initial Term Loan B — may have evolved sufficiently that the original pricing no longer serves as a meaningful benchmark for new issuances. At that point, the secondary market provides an organic mechanism for price discovery, and the MFN's protective function diminishes. The 12-month sunset balances the interests of initial lenders (who receive protection during the critical first year) and the Borrower (who retains flexibility to access the incremental facility without pricing constraints after the sunset expires).
D. Scope and Carve-Outs
The MFN provision is carefully scoped to apply only to certain categories of incremental indebtedness, with several important exclusions.
Applies to: The MFN provision applies to incremental term loans incurred under Section 2.14 of the Credit Agreement — that is, additional tranches of term loans that are issued under the existing Credit Agreement, secured by the same collateral, and administered by Crescent Harbor as Administrative Agent. These incremental term loans are structurally identical to the Initial Term Loan B in all material respects (other than pricing and maturity), and the MFN ensures that the pricing differential between the initial and incremental facilities does not exceed the agreed threshold.
Does not apply to:
(i) Incremental Revolving Commitments. The MFN does not apply to incremental revolving credit commitments incurred under the Credit Agreement. This exclusion is standard, as revolving facilities are fundamentally different instruments from term loans — they involve commitment fees, utilization-based pricing, and borrowing base or availability mechanics that make a direct yield comparison with term loans impractical and potentially misleading.
(ii) Incremental Equivalent Debt. The MFN does not apply to incremental equivalent debt incurred outside the Credit Agreement structure, including pari passu secured notes, pari passu secured term loans under a separate credit agreement, or other debt instruments that qualify as "incremental equivalent debt" under the Credit Agreement. This exclusion is discussed further below.
(iii) Refinancing Indebtedness. The MFN does not apply to replacement or refinancing term loans that are incurred to refinance existing incremental term loans (or the Initial Term Loan B itself). This exclusion ensures that lenders cannot use the MFN as a mechanism to extract pricing increases in connection with ordinary-course refinancings or extensions of existing debt.
Significance of the Incremental Equivalent Debt Exclusion. The exclusion of incremental equivalent debt from MFN coverage is a particularly noteworthy feature of the provision and merits separate discussion. During negotiations, Crescent Harbor (through Whitfield & Gage) initially proposed in the term sheet delivered on February 5, 2025 that the MFN apply to both incremental term loans incurred under the Credit Agreement and incremental equivalent debt incurred outside the Credit Agreement. Calderwood & Harkness, on behalf of the Borrower, successfully negotiated the exclusion of incremental equivalent debt from MFN coverage, which was agreed in the commitment letter executed on February 14, 2025.
The practical significance of this exclusion is substantial. It permits the Borrower to incur pari passu secured debt outside the Credit Agreement structure — for example, through a private placement of secured notes or a separately documented term loan facility — at any yield level, without triggering an MFN adjustment to the Initial Term Loan B spread. This provides the Borrower with an important degree of strategic flexibility, particularly in scenarios where market conditions have deteriorated and incremental debt must be priced at a significant premium to the Initial Term Loan B. By structuring such debt as incremental equivalent debt rather than as an incremental term loan under the Credit Agreement, the Borrower can avoid the cost of an MFN-triggered repricing of the entire $1,400,000,000 Initial Term Loan B facility.
As discussed in Section IV.D below, this exclusion is consistent with current market practice for sponsor-backed Term Loan B transactions and is increasingly common in recent precedent transactions.
E. Adjustment Mechanics
The Credit Agreement specifies the following procedural mechanics for the MFN adjustment:
Retroactive Application. If an MFN adjustment is triggered, the increased applicable margin on the Initial Term Loan B takes effect retroactively as of the date of incurrence of the incremental term loan that triggered the adjustment. The adjustment does not await the next scheduled interest payment date; rather, it applies from the date the incremental term loan is funded, and the incremental interest attributable to the margin increase for the period from the incurrence date to the next interest payment date is payable on such next interest payment date. This retroactive application ensures that initial lenders receive the full economic benefit of the MFN protection from the moment the higher-yielding incremental debt enters the capital structure.
Administrative Agent Calculation. Crescent Harbor Bank, N.A., as Administrative Agent, is responsible for calculating the Effective Yield on the incremental term loan, comparing it to the Effective Yield on the Initial Term Loan B, determining whether the 50 basis point threshold has been exceeded, and calculating the amount of any required margin increase. Upon making such determination, the Administrative Agent is required to provide written notice to the Borrower and the Lenders specifying the amount of the margin increase and the effective date thereof. The Administrative Agent's calculation is determinative absent manifest error.
No Lender Consent Required. The MFN adjustment is automatic and self-executing. No consent, approval, or vote of the initial Term Loan B lenders is required to implement the margin increase. The adjustment flows mechanically from the terms of the Credit Agreement upon the Administrative Agent's determination that the trigger conditions have been satisfied.
Permanence of Adjustment. Once triggered, the MFN adjustment is permanent for the remaining life of the Initial Term Loan B. The increased applicable margin does not reset, decrease, or expire, even if the incremental term loan that triggered the adjustment is subsequently repaid, refinanced, or otherwise retired. This permanence feature is standard in the leveraged loan market and reflects the view that the MFN adjustment compensates initial lenders for a structural repricing of their credit risk, which is not undone by the subsequent retirement of the incremental facility.
IV. Comparison to Recent Market Precedents
In evaluating the MFN provision in the Nexford Credit Agreement, we have reviewed a representative sample of recent sponsor-backed Term Loan B transactions closed in the fourth quarter of 2024 and the first quarter of 2025. The following observations reflect the current market landscape for MFN provisions in comparable transactions.
A. MFN Threshold
The 50 basis point MFN threshold in the Nexford Credit Agreement is the prevailing market standard for Term Loan B transactions in the current leveraged finance market. Among the transactions reviewed, the vast majority employed a 50 basis point threshold, with only a small number of transactions using alternative thresholds.
The observed market range for MFN thresholds in recent sponsor-backed transactions is as follows:
•  50 basis points: Most common threshold, representing the market consensus. Employed in approximately 80-85% of the sponsor-backed Term Loan B transactions reviewed.
•  75 basis points: Less common; typically seen in larger-capitalization transactions (facilities in excess of $3.0 billion) or transactions involving particularly strong credits with investment-grade characteristics. The higher threshold provides additional pricing flexibility to the borrower but is generally achievable only by borrowers with significant negotiating leverage or in periods of strong lender demand.
•  No MFN protection: Some "covenant-lite" transactions completed in 2024 featured no MFN protection at all, but these were generally in the broadly syndicated loan market for investment-grade crossover credits or transactions where the initial pricing was already highly competitive. These transactions are not directly comparable to the Nexford transaction given the differences in credit profile, leverage, and syndication dynamics.
The 50 basis point threshold in the Nexford Credit Agreement is squarely within the market mainstream and does not present any issues from the Borrower's perspective.
B. Sunset Period
The 12-month Applicable MFN Period in the Nexford Credit Agreement is the most common sunset duration in the current market. The observed range of sunset periods in recent transactions is as follows:
•  6 months: Borrower-favorable; less common in the current market environment. A 6-month sunset provides minimal protection to initial lenders and is typically seen only in transactions where the borrower has exceptional negotiating leverage or where the initial pricing is set at a significant premium to prevailing market levels.
•  12 months: The consensus middle ground and the most frequently observed sunset period. Employed in the majority of recent sponsor-backed Term Loan B transactions. The 12-month sunset balances lender protection with borrower flexibility and is considered the "default" duration in the absence of compelling reasons to deviate.
•  18 months: Lender-favorable; less common but observed in transactions where lenders have greater negotiating leverage (e.g., challenging syndication markets, weaker credit profiles, or smaller facilities with limited lender competition). An 18-month sunset was the initial Crescent Harbor proposal, which Calderwood & Harkness successfully negotiated down to 12 months.
Some recent transactions have featured "tiered" sunset structures — for example, a 50 basis point MFN threshold for the first 6 months, followed by no MFN protection for the remaining period, or a step-up in the threshold from 50 basis points to 75 basis points at the 6-month mark. These structures are not yet common in the sponsor-backed Term Loan B market and were not proposed by either party in the Nexford transaction. The straightforward 12-month sunset in the Nexford Credit Agreement is clean, easily administrable, and consistent with the prevailing market standard.
C. Effective Yield Definition
The definition of "Effective Yield" in the Nexford Credit Agreement is consistent with market practice in the following key respects:
OID/Upfront Fee Amortization. The inclusion of OID and upfront fees in the Effective Yield calculation, amortized over the lesser of the expected weighted average life of the applicable loans and four years, is the standard formulation in the leveraged loan market. The four-year amortization cap is virtually universal and prevents the dilution of OID economics that would result from amortizing the discount over the full contractual term of a seven-year maturity loan.
Exclusion of Arrangement and Structuring Fees. The exclusion of arrangement fees, structuring fees, underwriting fees, and similar agent/arranger compensation from the Effective Yield calculation is also market standard. This exclusion is important from the Borrower's perspective because it prevents private fee arrangements negotiated bilaterally between the Borrower and the arrangers of the incremental facility from inflating the Effective Yield and inadvertently triggering an MFN adjustment. The lender community has generally accepted this exclusion, recognizing that arranger compensation reflects the value of distribution and underwriting services rather than the ongoing credit economics of the facility.
SOFR Floor Treatment. The treatment of SOFR floors in the Effective Yield comparison — specifically, the inclusion of any floor differential in the yield calculation and the "ratchet" mechanism that increases the Initial Term Loan B floor to match a higher incremental facility floor — is consistent with the approach observed in the majority of recent precedent transactions. This treatment ensures that differences in floor levels are fully captured in the MFN analysis and cannot be used to circumvent the intent of the provision.
D. Incremental Equivalent Debt Exclusion
The exclusion of incremental equivalent debt from MFN coverage is an increasingly common feature in sponsor-backed Term Loan B transactions. Based on our review of recent precedents, approximately 60-70% of sponsor-backed Term Loan B credit agreements executed in the fourth quarter of 2024 and the first quarter of 2025 excluded incremental equivalent debt from MFN coverage. This represents a meaningful shift from the market practice observed as recently as 2022-2023, when the exclusion was present in a smaller proportion of transactions (estimated at 40-50%).
The trend toward excluding incremental equivalent debt from MFN coverage reflects the broader evolution of incremental capacity provisions in the leveraged loan market. As incremental equivalent debt structures have become more common and more widely accepted by the institutional lender community, borrowers have increasingly sought (and obtained) the flexibility to access the debt capital markets through non-Credit Agreement structures without the constraints imposed by the MFN. From the Borrower's perspective, this exclusion provides significant strategic optionality, particularly in scenarios where market conditions or acquisition financing requirements necessitate the issuance of higher-yielding secured debt.
The exclusion of incremental equivalent debt from MFN coverage in the Nexford Credit Agreement is consistent with current market practice and was successfully negotiated by Calderwood & Harkness at the term sheet stage. It is a borrower-favorable feature that should be preserved in the execution version of the Credit Agreement.
V. Borrower Considerations and Strategic Implications
A. Impact on Future Financing Flexibility
The MFN provision, as currently drafted, provides Nexford with reasonable flexibility to incur incremental term loans during the first twelve months following closing at modestly higher pricing without triggering an adjustment to the Initial Term Loan B spread. The 50 basis point threshold creates a meaningful buffer that can absorb the kind of modest pricing increases that typically result from normal market fluctuations, seasonal supply/demand dynamics, or the inherent premium associated with smaller incremental tranches.
Critically, the incremental equivalent debt exclusion provides Nexford with an important "escape valve." If Nexford needs to raise incremental secured debt within the first 12 months at a materially higher yield — for example, in connection with a significant acquisition or in a deteriorating credit market environment where incremental term loan pricing has moved significantly wider — it can structure the debt as incremental equivalent debt (i.e., secured notes or a separately documented term loan facility) rather than as an incremental term loan under the Credit Agreement. By doing so, Nexford can avoid triggering the MFN adjustment and the attendant repricing of the entire $1,400,000,000 Initial Term Loan B facility, which could represent a significant incremental cost.
To illustrate the potential cost implications: if an MFN adjustment of 25 basis points were triggered on the full $1,400,000,000 Initial Term Loan B facility, the incremental annual interest cost to the Borrower would be approximately $3,500,000 per year. Over the remaining six-year weighted average life of the facility, the present value of this incremental cost could be substantial. The incremental equivalent debt exclusion enables Nexford to avoid this outcome while still accessing the secured debt markets.
From a capacity perspective, the Borrower's pro forma first lien net leverage at closing is approximately 3.38x, which is well below the 4.50x incurrence test applicable to ratio-based incremental capacity. This implies that Nexford will have substantial incremental capacity — both under the Free-and-Clear Basket and under the ratio-based test — to raise additional debt for acquisitions, capital expenditures, or other corporate purposes. The MFN provision does not restrict the amount of incremental debt that may be incurred; it affects only the pricing consequences of certain types of incremental issuances during the first twelve months.
B. Interaction with Soft Call Premium
The Credit Agreement includes a "soft call" premium of 101 (1.00%) applicable to repricing transactions occurring within the first six (6) months after the Closing Date (i.e., through and including September 28, 2025). A "repricing transaction" is generally defined as (a) a refinancing or replacement of the Initial Term Loan B with a new term loan facility at a lower effective interest rate or (b) an amendment to the Credit Agreement that reduces the applicable margin on the Initial Term Loan B.
The MFN provision and the soft call premium serve complementary but distinct protective functions for initial lenders:
•  The soft call premium protects initial lenders against early refinancing or repricing at tighter spreads — i.e., it compensates lenders if the Borrower takes advantage of improved market conditions to reduce its borrowing costs within the first six months.
•  The MFN provision protects initial lenders against yield dilution through incremental facilities — i.e., it ensures that new lenders entering the credit at higher yields do not receive materially better economics than the initial lenders who assumed the original credit risk.
The Borrower should be aware that, in certain scenarios, both provisions could be implicated simultaneously. If the Borrower were to incur an incremental term loan within the first six months at a higher yield and, in conjunction with or shortly after such incurrence, pursue a repricing of the Initial Term Loan B, the soft call premium could be triggered in addition to the MFN adjustment. However, the MFN adjustment itself — which is an automatic increase in the applicable margin — should not constitute a "repricing transaction" for purposes of the soft call provision, as it results in an increase rather than a decrease in the effective interest rate. This interpretation is consistent with the plain language of the Credit Agreement and with market practice, but should be confirmed in the execution version.
C. Interaction with the Free-and-Clear Basket
The Free-and-Clear Basket (the greater of $280,000,000 and 100% of LTM Adjusted EBITDA, currently approximately $385,000,000) permits the Borrower to incur incremental term loans and/or incremental revolving commitments without satisfying any financial ratio test. However, the Free-and-Clear Basket does not exempt incremental term loans from MFN coverage. This distinction is important: the Free-and-Clear Basket is a capacity limitation (how much incremental debt can be incurred), whereas the MFN is a pricing protection mechanism (at what yield incremental debt can be incurred without triggering a repricing of the existing facility).
Even if an incremental term loan is incurred entirely within the Free-and-Clear Basket and without any requirement to satisfy the 4.50x first lien net leverage incurrence test, it remains subject to the MFN provision if incurred within the 12-month Applicable MFN Period and if its Effective Yield exceeds the Initial Term Loan B Effective Yield by more than 50 basis points. This treatment is standard market practice and was not contested during negotiations. The Borrower and Granite Peak should factor this pricing constraint into their planning for any incremental term loan issuances during the first year.
VI. Negotiation History
The MFN provision was negotiated during the term sheet and commitment letter phase of the transaction. The following is a summary of the key negotiation milestones:
February 5, 2025 — Crescent Harbor Term Sheet. The initial term sheet delivered by Crescent Harbor (through Whitfield & Gage) proposed MFN protection with the following parameters: (a) a 50 basis point threshold; (b) an 18-month sunset period; and (c) coverage of both incremental term loans incurred under the Credit Agreement and incremental equivalent debt incurred outside the Credit Agreement. The 50 basis point threshold was consistent with market expectations and was not contested.
February 10, 2025 — Calderwood & Harkness Markup. Calderwood & Harkness, on behalf of the Borrower, delivered a marked term sheet proposing the following modifications to the MFN provision: (i) reducing the sunset period from 18 months to 12 months, consistent with the prevailing market standard for comparable sponsor-backed transactions; (ii) excluding incremental equivalent debt from MFN coverage, to preserve the Borrower's flexibility to access the secured debt markets through non-Credit Agreement structures without triggering a repricing of the Initial Term Loan B; and (iii) confirming that the Effective Yield definition excludes arrangement fees, structuring fees, and similar arranger compensation that is not broadly shared with the lender syndicate.
February 14, 2025 — Commitment Letter Execution. Following a brief negotiation, Whitfield & Gage (on behalf of Crescent Harbor) agreed to both the 12-month sunset and the exclusion of incremental equivalent debt from MFN coverage. These terms were incorporated into the commitment letter executed on February 14, 2025. The Effective Yield exclusion of arrangement and structuring fees was not specifically addressed in the commitment letter (which cross-referenced the forthcoming credit agreement for detailed definitions) but was understood to be market standard and non-controversial.
February 24, 2025 — First Draft Credit Agreement. The first draft of the Credit Agreement, prepared by Whitfield & Gage, incorporated the MFN terms agreed in the commitment letter. The definition of "Effective Yield" in the first draft expressly excluded arrangement fees and structuring fees, consistent with Calderwood & Harkness's term sheet markup. Calderwood & Harkness reviewed the first draft and confirmed that the MFN provision was consistent with the agreed terms. No comments were raised on the MFN provision in Calderwood & Harkness's markup of the first draft, which was returned on March 3, 2025.
March 10, 2025 — Second Draft Credit Agreement. The second draft, circulated by Whitfield & Gage, made minor conforming changes to the incremental facility provisions but did not modify the MFN provision. No comments were raised on the MFN provision by either party.
March 17, 2025 — Third Draft Credit Agreement. The third draft, which is the current working draft, reflects no changes to the MFN provision from the second draft. The provision is substantially agreed as of the third draft and is not expected to be the subject of further negotiation.
In summary, the MFN provision was efficiently negotiated, with Calderwood & Harkness securing the two principal concessions sought by the Borrower (reduction of the sunset from 18 months to 12 months and exclusion of incremental equivalent debt) at the commitment letter stage. No further substantive modifications have been required or proposed.
VII. Open Items and Recommendations
A. Remaining Drafting Points
While the MFN provision is substantially agreed, the following drafting points should be verified in the execution version of the Credit Agreement to ensure conformity with the agreed commercial terms:
1.  OID Amortization Period. Confirm that the definition of "Effective Yield" in the execution version clearly specifies that OID and upfront fees are to be amortized over the lesser of (x) the expected weighted average life of the applicable loans and (y) four (4) years. The current draft language in the third draft Credit Agreement is consistent with this formulation, but the definition should be checked for conformity with the specific language used in the term sheet and commitment letter to avoid any ambiguity. In particular, verify that the phrase "expected weighted average life" is used consistently and is not inadvertently replaced with "remaining weighted average life" or "stated maturity," which would produce different results.
2.  Mechanism of Adjustment (Spread vs. Effective Yield Equalization). Confirm that the MFN adjustment is expressed in terms of an increase in the applicable margin (spread) sufficient to ensure that the Effective Yield on the Initial Term Loan B is no more than 50 basis points less than the Effective Yield on the incremental term loan. The current draft uses this "Effective Yield equalization" formulation, which is the preferred approach because it captures all components of yield (margin, floor, and OID) in a single comparison, rather than adjusting each component individually. The alternative formulation — which would adjust only the applicable margin component by the spread differential, without accounting for floor or OID differences — could produce unintended results and should be avoided. The current draft language is appropriate, but this point should be confirmed in the final review.
3.  Scope of Exclusions. Verify that the definitions of "Incremental Term Loans," "Incremental Equivalent Debt," and "Refinancing Indebtedness" in the Credit Agreement clearly and unambiguously delineate the scope of MFN coverage. In particular, confirm that: (a) incremental equivalent debt incurred under Section 2.15 (or the analogous provision) is expressly excluded from the definition of "Incremental Term Loans" for purposes of Section 2.14(b)(iv) (the MFN provision); and (b) refinancing indebtedness incurred to replace or refinance existing incremental term loans is similarly excluded. Cross-references between the relevant definitions should be checked for accuracy.
These drafting points are conforming and cleanup items that do not require further commercial negotiation between the parties. They can be addressed as part of the standard closing review process.
B. Recommendation
Based on the analysis set forth in this memorandum, we make the following recommendations:
1.  No Further Revisions Recommended. The most favored nation provision as currently drafted in the third draft Credit Agreement is within market norms for sponsor-backed Term Loan B facilities, is consistent with the terms agreed in the commitment letter executed on February 14, 2025, and is acceptable from the Borrower's perspective. No further substantive revisions to the MFN provision are recommended.
2.  Verification of Drafting Points. The remaining drafting points identified in Section VII.A above should be verified in the execution version of the Credit Agreement as part of the standard closing review process. These are conforming items that do not require further commercial negotiation.
3.  Client Communication. We recommend advising Nexford's internal legal and finance teams — specifically, David Engstrom, General Counsel; Michelle Kaplan, Chief Financial Officer; and Priya Mehta, Vice President of Treasury — as well as Granite Peak's deal team (Ryan Ostrowski, Principal) that the MFN provision has been resolved on terms consistent with current market standards and the agreed term sheet, and that no further commercial negotiation is required with respect to this provision. This communication will allow the client teams to focus their attention on the remaining open items in the Credit Agreement (which are addressed in separate memoranda) and will facilitate an efficient path to closing.
VIII. Conclusion
The most favored nation provision in the Nexford Industrial Holdings Inc. $1,400,000,000 Senior Secured Term Loan B Credit Agreement, as reflected in the third draft Credit Agreement circulated on March 17, 2025, is a well-crafted and market-standard provision that appropriately balances the interests of the Borrower and the initial Term Loan B lenders. The key features of the provision — the 50 basis point MFN threshold, the 12-month sunset period expiring on March 28, 2026, and the exclusion of incremental equivalent debt from MFN coverage — are each within the mainstream of current market practice for comparable sponsor-backed leveraged finance transactions.
The provision was efficiently negotiated, with Calderwood & Harkness securing the two principal concessions sought by the Borrower (reduction of the sunset from 18 months to 12 months and exclusion of incremental equivalent debt) at the commitment letter stage. The provision has remained unchanged through three drafts of the Credit Agreement and is substantially agreed between the parties.
The MFN provision is protective of the Borrower's future financing flexibility while providing reasonable and proportionate protection to initial Term Loan B lenders against yield dilution through incremental issuances during the first year following closing. The remaining drafting points identified in this memorandum are conforming items that should be addressed in the execution version but do not require further commercial negotiation.
This memorandum should be read in conjunction with the Internal Memorandum — Incremental Facility Provisions and Capacity Analysis (to be dated March 13, 2025) for a comprehensive view of the Borrower's incremental debt capacity, incurrence tests, and related provisions under the Credit Agreement. Taken together, these two memoranda provide a complete picture of the incremental facility framework governing the Nexford Credit Agreement.
DISTRIBUTION: This memorandum is limited in distribution to the Calderwood & Harkness LLP deal team for Matter No. 1005-00001 (Client/Matter Code: IBL-NIH-2025-031). This memorandum constitutes attorney work product and is protected by the attorney-client privilege and the work product doctrine. It is intended solely for internal use by Calderwood & Harkness LLP in connection with its representation of Nexford Industrial Holdings Inc. and Granite Peak NIH Holdings, LLC. No portion of this memorandum may be disclosed to any third party without the prior written consent of the undersigned.
PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT
Date: | March 11, 2025
To: | Claudia Merritt, Responsible Partner, Banking & Finance
From: | Marcus Leung, Lead Associate, Banking & Finance
Re: | Most Favored Nation (MFN) Provision Analysis — Nexford Industrial Holdings Inc. $1,400,000,000 Senior Secured Term Loan B
Matter No.: | 1005-00001
Client/Matter Code: | IBL-NIH-2025-031

PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT

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